Reuters poll projects official manufacturing PMI to ease to the 50-mark, highlighting persistent weakness in China’s domestic economy despite resilient exports and AI-led manufacturing demand.
China’s manufacturing activity is expected to have stalled in July, with sluggish domestic demand and rising cost pressures offsetting the benefits of robust export growth, according to a Reuters poll of economists.
The survey of 31 economists forecasts China’s official Manufacturing Purchasing Managers’ Index (PMI) to slip to 50.0 in July, down from 50.3 in June. A reading of 50 separates expansion from contraction, suggesting factory activity may have lost momentum after modest growth in the previous month.
The official PMI data is scheduled to be released by China’s National Bureau of Statistics on Friday.
While export-oriented manufacturers, particularly those producing AI-related and high-tech goods, continue to benefit from strong global demand, companies focused on the domestic market are facing subdued consumer spending and cautious business sentiment.
China’s economy has struggled to regain broad-based momentum despite resilient exports. The country’s gross domestic product (GDP) expanded at its slowest pace in more than three years during the second quarter, weighed down by weak retail sales and sluggish investment.
Bank lending has also remained soft, prompting the People’s Bank of China to reportedly urge commercial banks to increase credit support in recent months.
Economists say reviving domestic demand remains China’s biggest challenge. A prolonged housing market downturn, fragile employment conditions and subdued consumer confidence have encouraged households to save rather than spend, limiting the recovery in private consumption.
More from BusinessMarkets are now awaiting signals from the upcoming Politburo meeting, expected before the end of July, where China’s top leadership will review economic conditions. However, analysts believe Beijing is unlikely to announce large-scale stimulus measures, opting instead to accelerate existing infrastructure spending and targeted policy support.
The need for aggressive stimulus has been partly eased by China’s strong export performance. Goods exports surged 27% year-on-year in U.S. dollar terms in June, emerging as a key driver of economic growth. Meanwhile, industrial profits continued to expand in June, although growth slowed to 15.1% from 21.1% in May.
Separately, the private-sector RatingDog Manufacturing PMI, due on August 3, is also expected to edge lower to 51.5 from 51.7 in June, indicating manufacturing growth may continue but at a slower pace.
